Long-term care is an important consideration for Southern California Edison employees preparing for retirement, but insurance is not necessarily the right solution for everyone. The decision depends on factors such as your financial resources, health, age, family circumstances, retirement income needs, and personal preferences regarding how and where you would want to receive care.

 

For some individuals, long-term care insurance may provide a way to help protect retirement assets from the financial impact of an extended care event. Others may have sufficient resources to self-fund potential expenses or may choose to evaluate alternative planning strategies.

 

The important question is not simply whether you should purchase long-term care insurance. It is whether you have considered how a potential need for extended care could affect your retirement plan, your spouse or family, and the assets you have spent a lifetime accumulating.

 

What Is Long-Term Care?

 

Long-term care generally refers to assistance needed when an individual is unable to independently perform certain activities of daily living or experiences a qualifying cognitive impairment. Depending on an individual's needs and circumstances, care may be provided in a variety of settings, including the home, an assisted living community, or a skilled nursing facility.

 

Long-term care is different from traditional medical care. Health insurance and Medicare may cover certain medical services and limited skilled care under specific circumstances, but they generally are not designed to pay for ongoing custodial care over an extended period.

 

For retirees, this creates an important financial planning question: If you or your spouse needed care for an extended period, how would you pay for it?

 

Why Long-Term Care Planning Matters

 

For many SCE employees, retirement planning focuses heavily on creating sufficient income to support a desired lifestyle. Pension benefits, Social Security, 401(k) savings, and other investments may all contribute to that goal.

 

An extended care event can change those assumptions.

 

In addition to the direct cost of care, a long-term care need may affect a spouse's financial security, alter retirement spending, require additional withdrawals from investment accounts, or reduce assets intended for future generations.

 

This is why long-term care planning is often less about predicting whether you will need care and more about understanding how your financial plan would respond if you did.

 

Key Question: If you or your spouse needed extended care, how would those expenses be funded without significantly disrupting your broader retirement plan?

 

How Does Long-Term Care Insurance Work?

 

Long-term care insurance is designed to help pay for qualifying care expenses, subject to the terms and conditions of the policy.

 

Policies can vary significantly in areas such as:

 

• Monthly or daily benefit amounts
• Benefit periods
• Elimination periods
• Inflation protection
• Types of covered care
• Eligibility requirements
• Premium structure

 

Traditional long-term care insurance generally requires ongoing premium payments in exchange for coverage if qualifying care is needed. Depending on the policy, benefits may help pay for care provided at home or in other eligible care settings.

 

Because policy provisions and costs vary, it is important to understand the specific terms of any coverage being considered.

 

Key Question: Would transferring a portion of the financial risk associated with long-term care help support your broader retirement objectives?

 

Traditional Insurance Is Not the Only Approach

 

Long-term care planning has evolved considerably, and individuals may have several ways to prepare for potential care expenses.

 

Some may consider traditional long-term care insurance, while others may evaluate life insurance or annuity products that include long-term care or chronic illness benefits. These types of products can have different features, costs, guarantees, limitations, and eligibility requirements.

 

Other individuals may choose to self-fund potential care expenses using personal savings and investments.

 

There is no single approach that is appropriate for everyone. The goal is to understand the available strategies and determine how each may fit within your overall financial plan.

 

Should You Self-Fund Long-Term Care?

 

Individuals with significant retirement assets may consider paying for future care expenses directly from their own resources.

 

While self-funding may provide flexibility, it also means accepting the financial risk associated with the duration and cost of care.

 

When evaluating this approach, it may be helpful to consider:

 

• How much of your assets are readily available
• The potential impact on a spouse's financial security
• Whether additional withdrawals could affect your retirement income plan
• The potential tax implications of accessing certain assets
• Whether preserving assets for heirs is an important objective

 

Having the financial resources to pay for care does not necessarily mean self-funding is automatically the preferred strategy. It is one option that should be evaluated alongside other alternatives.

 

Consider the Impact on Your Spouse and Family

 

The financial impact of long-term care often extends beyond the individual receiving care.

 

A spouse may need to manage household expenses while significant financial resources are directed toward care. Adult children may also become involved in coordinating care, providing transportation, managing finances, or assisting with day-to-day needs.

 

For this reason, long-term care planning can be both a financial and a family conversation.

 

Discussing your preferences in advance may help family members better understand how you would want care to be handled and what financial resources may be available.

 

Key Question:  Does your family understand your preferences for care and how you plan to address the potential financial impact?

 

When Should You Consider Long-Term Care Planning?

 

Many people wait until retirement to begin thinking about long-term care. However, age and health can influence both the availability and cost of certain insurance options.

 

Planning earlier may provide more time to evaluate alternatives and determine whether insurance, self-funding, or another strategy is appropriate.

 

This does not mean everyone should purchase long-term care insurance at a particular age. Rather, long-term care should be considered as part of the broader retirement planning process before a potential need for care arises.

 

Common Mistakes to Avoid

 

Assuming Medicare Will Cover Long-Term Care

Medicare may cover certain skilled nursing or rehabilitation services under specific conditions, but it generally does not provide comprehensive coverage for extended custodial long-term care.

 

Waiting Until a Health Event Occurs

Certain insurance options require medical underwriting, which means changes in health may affect eligibility or cost.

 

Focusing Only on the Cost of Insurance

Premiums are an important consideration, but they should be evaluated alongside the potential financial impact of paying for an extended care event from personal assets.

 

Assuming You Have Enough Assets Without Running the Numbers

A significant asset base may make self-funding possible, but the potential impact on retirement income, a surviving spouse, taxes, and legacy goals should also be considered.

 

Treating Long-Term Care as a Standalone Decision

Long-term care planning is often most effective when evaluated alongside retirement income, investments, insurance, estate planning, and family considerations.

 

Key Takeaways

 

• Long-term care can represent a significant financial risk during retirement.
• Medicare and traditional health insurance generally do not cover all forms of extended custodial care.
• Long-term care insurance may be appropriate for some individuals but is not the right solution for everyone.
• Traditional insurance, hybrid solutions, and self-funding are among the strategies individuals may consider.
• Age, health, financial resources, family circumstances, and personal goals can influence the appropriate planning approach.
• Long-term care planning should be considered within the context of a broader retirement and financial plan.

 

Frequently Asked Questions

 

Should SCE employees consider long-term care insurance?

Long-term care insurance may be worth evaluating as part of a comprehensive retirement plan. Whether coverage is appropriate depends on individual health, age, financial resources, family circumstances, and planning objectives.

 

Does Medicare pay for long-term care?

Medicare may cover certain short-term skilled care under specific circumstances, but it generally does not cover ongoing custodial care for an extended period.

 

What is the best age to consider long-term care insurance?

There is no single age that is appropriate for everyone. Because age and health may affect eligibility and premiums, some individuals choose to evaluate their options before retirement or during the years leading up to it.

 

Can I pay for long-term care with my own assets?

Some individuals choose to self-fund potential long-term care expenses. The appropriateness of this approach depends on available assets, retirement income needs, family considerations, and other financial objectives.

 

What are hybrid long-term care policies?

Certain life insurance and annuity products may include benefits designed to help address qualifying long-term care or chronic illness needs. Features, costs, benefits, and limitations vary by product.

 

How does long-term care planning help protect a spouse?

Planning for potential care expenses may help reduce the risk that an extended care event significantly affects the assets and income available to support a spouse.

 

Final Thoughts

 

Long-term care planning is ultimately about preparing for a possibility that can have significant financial and personal consequences.

 

For Southern California Edison employees who have spent decades building pension benefits, retirement savings, and other assets, an extended care event has the potential to affect more than healthcare expenses. It may influence retirement income, a spouse's financial security, family dynamics, and the assets ultimately passed to future generations.

 

The goal is not to assume that everyone needs long-term care insurance. Instead, it is to understand the risk, evaluate the available options, and determine how your financial plan would respond if care were needed.

 

At Guardian Financial Partners, we believe these decisions are best considered as part of a coordinated financial strategy. By evaluating long-term care alongside retirement income, investments, insurance, and estate planning, individuals can make informed decisions designed to help preserve their assets and protect their lifestyle.

 

 

About the Author

 

Casey S. Bartels, CFP® is a Founding Partner of Guardian Financial Partners. Since 2007, Casey and his partners have worked with Southern California Edison employees and executives, helping them navigate retirement planning, pension decisions, and other important financial considerations.

 

Educating Edison is our educational series designed to help Southern California Edison employees better navigate their financial lives.

 

Guardian Financial Partners is a Registered Investment Adviser. Guardian Financial Partners is not affiliated with, endorsed by, or sponsored by Southern California Edison.